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Second Opinion

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IRS Issues Final Rule on CHNAs and Other ACA Requirements

January 9, 2015—The U.S. Department of the Treasury and Internal Revenue Service (IRS) issued its final rule, “Additional Requirements for Charitable Hospitals; Community Health Needs Assessments for Charitable Hospitals,” in the Dec. 31 Federal Register. While the regulations are effective Dec. 29, 2014, hospitals can continue to rely on both the 2012 and 2013 proposed regulations until the first taxable year beginning after Dec. 29, 2015.

Included as part of the final rule:

Government hospitals that are recognized as 501(c)(3) hospitals must meet the requirements of the rule, except those related to information that must be attached to a Form 990 since government hospitals generally do not file a 990;

When identifying health needs under the Community Health Needs Assessment (CHNA), the needs may include financial and other barriers to accessing care, preventing illness, ensuring adequate nutrition, or social, behavior and environmental factors that influence health;

As required by the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152), hospitals must have a financial assistance policy (FAP) and an emergency medical care policy. As part of the FAP, the hospital must list providers delivering emergency or other medically- necessary care in the hospital and specify which providers are covered by the hospital’s FAP and which are not. If emergency department care is outsourced to a third party and the care provided by the third party is not covered under the hospital’s FAP, the hospital may not be considered to operate an emergency room, which is one of the examples used by the IRS to illustrate a nonprofit hospital’s tax exempt claim; and

For emergency or medically necessary care, patients eligible under the FAP cannot be charged more than the amounts generally billed (AGB). Hospitals can determine AGB by using the look-back methodology, which would be based on Medicaid rates alone or in combination with Medicare fee-for-service and all private insurers that pay claims to the hospital. The AGB can also be determined by the prospective methodology, under which the hospital would determine the payment if the FAP-eligible patient were a Medicare fee-for-service or Medicaid beneficiary, including what the patient would be responsible for in co-pays, co-insurance, and deductibles.